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Wednesday, September 17, 2014         

OUR VIEW | FUNDING OPTIONS


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Creative financing needed for water system upgrades


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Hawaii residents are starting to develop a "duck and cover" reflex whenever any government official starts talking about budgets, because new taxes and fees have been coming at every turn. The latest occasion for this sense of foreboding: a proposal by the Honolulu Board of Water Supply to expand its program of maintenance.

Wayne Hashiro, the water board's manager, gave a heads-up to a City Council committee this week about long-range planning to get the semi-autonomous agency out in front of a growing maintenance challenge. The aim — to greatly accelerate the pace of rebuilding and replacing the water system's components — will increase water rates, he said, but it's uncertain when or how much.

As tough as it is to hear that amidst discussions of assorted fiscal woes and tax solutions, pushing Honolulu's water delivery system toward a more proactively maintained state is a wise policy. But success will hinge on how carefully it is financed. Hashiro's team has a lot of work ahead of it before the ratepayers will be convinced the time is right to embark on that program now.

For instance, Councilwoman Ann Kobayashi raised the subject of finding alternative revenue streams, which is a rational proposal. Ordinarily regular water fees should be enough to underwrite the operations of the water system, but a special push such as the one Hashiro proposes is an extra burden, and some out-of-the-box thinking is called for.

Here's what is being contemplated: increasing at least fivefold the annual $40 million capital improvement program budget. Investing $200 million to $300 million each year in replacing pipelines, pumps and other components would make the Oahu system far less vulnerable to emergency patches and urban disruptions when untended, aging water mains burst.

The question is: How fast can we get to that point? Hashiro said pushing it through over the mere six-year course of a CIP plan would mean annual rate increases of 25 percent or more, and he acknowledges that this would be ghastly. He hopes it might be phased in over 15 years, and is having a rate-plan consultant crunch the numbers to see how much that might cost. Ultimately it may be best to program in the rate hikes once the economic recovery takes stronger hold, rather than in the initial years of a six-year cycle.

Kobayashi proposed that the water board consider developing the employee parking lot into a condominium that generates revenue, offsetting what would have to be collected from rate payers. Hashiro explained that this is not as simple as it sounds, in that the land would have to be declared surplus and that part of the parcel is needed for the board's baseyard and other purposes.

But he said he is getting advice on how this might work without compromising the board's nonprofit status, and that's good. Hashiro pointed out that the board's charter is as a developer of water, not of residential property. While that may be true, the planned acceleration of maintenance — especially given that Oahu's rate of water-main breaks is below the national average — is also a departure from the norm. It's time to get creative with this.

The goal here is a worthwhile one, but Hawaii taxpayers have many competing demands on their money. The course charted by the water board toward a better system of upkeep must recognize that public resources have their limits.





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Water rate increase sought to fund repairs




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